BIDS is not compatible with TFS 2010. It has to do with TFS 2010 having the concept of Project Collections whereas 2005 and 2008 do not. When adding a Team Foundation Server to Visual Studio Team Explorer 2008 (Tools -> Connect to a Team Foundation Server -> Servers -> Add) there is no way to reference a TFS Project Collection. However, it is possible to get your Visual Studio 2008/BIDS environment up to speed.
There are four things you need.
1) Visual Studio Team System 2008 Team Explorer downloadable here.
2) Visual Studio 2008 SP1 downloadable here.
3) Visual Studio Team System 2008 SP1 Forward Compatibility Update for Team Foundation Server 2010 downloadable here.
4) Lastly you'll need to create a registry entry for each Server/Collection you want to use. Launch the registry editor (regedit at a command prompt) and create an entry in HKEY_CURRENT_USER\Software\Microsoft\VisualStudio\9.0\TeamFoundation\Servers similar to below.
Value name: ServerName
Value data: http://ServerName:PortNumber/tfs/CollectionName
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